+1 - Solvay

Financial
1. Market & Growth – Strategic Risk
Strategic Risk is Solvay’s exposure to adverse developments in our markets or our competitive environment as well
as the risk of making erroneous strategic decisions. Examples of such risks are technological leaps allowing
the development of substitute products or manufacturing processes, drastic changes in energy prices, the lack
of success of a new product and product pipeline failures, scarcity of key raw materials, reduction of demand
in our main markets as a consequence of new legislation, events affecting our most important customers, and
significant imbalances between supply and demand in our markets, major social crises.
Mitigation efforts
The potential impact of adverse events is managed at Group level, and involves in particular:
– Managing activities and maintaining a balanced portfolio of products,
– Diversification of the customer base in different market segments,
– Adaptation of operations to the changing macroeconomic and market environment,
– Selective vertical integration to limit potential cumulative effects from raw materials,
– Strict financial policy of controlling the debt to equity ratio.
The periodic review of the main macroeconomic assumptions, market assumptions and key strategic issues of each
Strategic Business Unit (SBU) for the next five years is managed in the strategy and plan process of the Group.
The strategy phase focuses on market and competitive environment assumptions and on the strategic options
of each SBU. The planning phase focuses on the business plan, scenarios, and on the main projects on which
execution of the strategy relies. The strategy and business plans of each SBU are presented by the management
of the SBU to, discussed with and amended and approved by the Executive Committee. The Corporate
Development department acts as facilitator in the process, cross-checking assumptions between the different
business units and with external sources. Corporate Development continuously updates its strategic analysis of
the competitive environment. The major strategic orientations are submitted to the Board of Directors, which has
the ultimate responsibility for the Group’s strategy.
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2. Supply Chain Risk and Risks Attached to Production Units
Supply Chain and Risk attached to production units is Solvay’s exposure to risks associated with raw material,
suppliers, production units and transportation, such as risks of major equipment failure or damage, transportation
accidents, drastic shortages of raw materials or energy, natural disasters or transportation strikes.
Mitigation efforts
Key risk areas are addressed with policies and risk control programs such as health and safety, process safety,
risk engineering, integrated resource planning and supply chain optimization systems (ERP), emergency response,
central and local crisis management, business continuity, etc.
All plants are subject to audits and in this context the risks of damage to production units and consequential
business interruption events are identified and quantified by risk engineers. Solvay evaluates the recommendations
and implements those it finds appropriate.
The geographical distribution of production units around the world reduces the overall impact of one production
unit being damaged or interrupted. Some pharmaceutical and specialty products are however, only produced
in one single plant. The inventories of finished products and raw material for pharmaceutical and some specialty
products are managed to create buffer stocks.
Solvay is buying insurance to reduce the financial impact of potential events causing extensive damage and
consequential interruption of supply.
In reference to Raw Materials, further to its ownership of several mines and quarries, Solvay reduces the risk
of disruption (availability, reliability and price) by:
• the use of medium and long-term contracts,
• the diversity and the flexibility of the sources of raw materials to the extent possible,
• the development of partnerships with preferred suppliers.
Solvay Global Annual Report 2007